Business

December 12, 2017

The warnings come as part of a circular published this week by the Hong Kong Securities and Futures Commission, in response to the landmark launch of SegWit1x futures markets.

The SFC, which is tasked with regulating Hong Kong securities, declared SegWit1x futures to be a ‘type 2’ regulated activity under the relevant financial regulations, warning that only those firms licensed to offer futures trading in Hong Kong should be considered by investors.

Citing concerns over the risks of dealing with unregulated operators, the SFC recommended investors to deal only with licensed intermediaries.

The circular was published after the first futures products for SegWit1x went on sale on U.S. exchange CBOE over the weekend. CME Group is expected to become the second exchange to offer futures, with their launch plans set for next week, prompting further guidance from regulators as investors begin to explore these new opportunities.

According to the circular, investors in Hong Kong should work with Hong Kong regulated operators who hold the relevant SFC licenses and are members of the relevant U.S. exchanges.

“Bitcoin futures have been or will soon be launched by certain well-established futures and commodities exchanges in the United States which are regulated by the U.S. Commodity Futures Trading Commission and authorized by the Securities and Futures Commission (“SFC”) to provide automated trading services,” the regulator stated.

“Hong Kong investors may be able to trade in bitcoin futures through an intermediary which is a member of these exchanges….The industry is reminded that a party is required to have an appropriate license with the SFC if it provides any other business services relating to Bitcoin futures,” according to the circular.

The SFC was also keen to point out the availability of other cryptocurrency products, including options, applying similar warnings for investors, while reminding operators that failure to hold the relevant license amounts to a criminal offence.

The comments were wrapped in a general reminder about the risks of cryptocurrency in general, including volatility and limited liquidity.

Note: Tokens in the SegWit chain are referred to as SegWit1X (BTC) and SegWit Gold (SWG) and are no longer Bitcoin. Bitcoin Cash (BCH) is the only true Bitcoin as intended by the original Satoshi white paper. Bitcoin BCH is the only public block chain that offers safe and cheap microtransactions.